Trump’s Tax Evasion is an Indictment of American Plutocracy

Democrats have to attack not just Trump for being a scofflaw but also the system that lets the ultra-rich avoid paying their fair share.

By Jeet Heer – Sep 28, 2020

In 2016, while running for president, Donald Trump paid Stephanie Clifford, the actor who stars in adult films under the name Stormy Daniels, $130,000 to keep quiet about a sexual encounter; for that entire year, Trump paid a total of $750 in federal income tax. The following year, his first as president, his income tax again totaled $750. Those two years were unusual for Trump, because normally in the past decade he hasn’t paid income tax at all. The New York Times, which in a blockbuster report based on documents concerning Trump’s taxes going back two decades before 2018, has found that in 11 of 18 years, Trump paid no taxes. That’s a remarkable achievement for a putative billionaire.

The Times exposé shows that Trump has pulled off the enviable trick of living like a king while paying taxes like a pauper. He’s done this through a complex shell game where taxes for the profitable part of his financial empire (largely his work as a reality-show star on The Apprentice and a few older real estate holdings) earn a lavish fortune that is not taxed because other enterprises, notably golf courses, regularly post large losses. But beyond this juggling game, Trump has also avoided taxes with actions that skirt the edges of the law and demand investigation, notably the practice of paying consulting fees to the three adult children (Ivanka Trump, Donald Trump Jr., and Eric Trump) who also help manage the Trump Organization. This self-dealing is combined with many questionable write-offs for personal expenses, including $70,000 for haircuts and more than $95,000 for a hair stylist used by Ivanka Trump.

While this chicanery is keeping Trump afloat, the Times observes that his business empire is suffering a heavy debt load that could capsize it. “What’s more, the tax records show that Mr. Trump has once again done what he says he regrets, looking back on his early 1990s meltdown: personally guaranteed hundreds of millions of dollars in loans, a decision that led his lenders to threaten to force him into personal bankruptcy.

“This time around, he is personally responsible for loans and other debts totaling $421 million, with most of it coming due within four years. Should he win re-election, his lenders could be placed in the unprecedented position of weighing whether to foreclose on a sitting president.”

This $421 million only includes short-term debt due in the next few years. Commenting on the Times story, Dan Alexander, a reporter for Forbes, calculates, based on available public record, that Trump has a total of $1.1 billion in debt.

That Trump is sitting on a mountain of debt raises the disturbing question: Who owns the president? As Sarah Longwell, publisher of the conservative magazine The Bulwark, argues, “People are focused on how little Trump paid in taxes, but to me this is the bigger story. He was deeply in debt and looking for a way to reinvigorate his brand. So he ran for President. And he’s been a walking conflict of interest ever since.”

Four years into the Trump presidency, many of his opponents have become too jaded to believe that any new revelations can hurt him. After all, in polls he’s held on to his 43 percent base despite everything that has happened, ranging from countless offensive statements to impeachment for Ukrainegate to Covid-19 to the economic meltdown.

But there’s reason to think that a tax scandal might have a salutary political impact. Simply in terms of electoral politics, it helps the Democrats to have something that keeps the focus on Trump. Joe Biden has led in the polls against Trump for over a year, an unprecedented dominance in recent decades of presidential politics. Trump’s only hope is for arguments against Biden to start dragging down the Democratic nominee. But as long as the focus of attention is on Trump’s misdeeds, this shift can’t happen. The tax scandal helps Biden run out the clock in the last sprint of the election.

More importantly, the tax scandal helps undermine a myth that has been a core part of Trump’s success: the false belief that he’s a successful self-made businessman. Writing in Politico in 2019, three political scientists from the University of Maryland (Jared McDonald, David Karol, Lilliana Mason) adduced polling that showed “that voters are not simply uninformed about President Trump’s biographical background, but misinformed—and that misinformation has serious political consequences.” All too many Americans, including some Democrats, believed that Trump was “a self-made billionaire, a business tycoon of unfathomable success.” “Large swaths of the public believe the Trump myth,” their research found. “Across three surveys of eligible voters from 2016 to 2018, we found that as many as half of all Americans do not know that he was born into a very wealthy family.”

But these researchers offered some hope for Democrats, because evidence indicates that being told the truth about Trump’s business history changes how voters think about him. Being told that Trump inherited his fortune has “noticeable and statistically significant effects on evaluations of Trump’s character. For Democrats, who already see Trump as lacking empathy, this information makes them think of him as even less empathetic. But among Republicans, the information is even more damning, reducing perceptions of empathy by more than 10 percentage points.”

There’s ample political reason for the Biden campaign to start advertising Trump’s tax corruption. But this scandal clarifies larger problems that go beyond the presidential election. As Elizabeth Warren notes, “This is about more than one man’s personal tax scams. Donald Trump is a liar, a cheater, and a crooked businessman, yes. But he’s also taking advantage of a broken, corrupt, and unequal system that’s built for people like him to do what he did.”

As the old adage goes, the real scandal is usually what is legal. Trump might well have crossed legal lines in order to avoid taxes. He should certainly be investigated. But much of what he’s done is standard operating procedure for the American rich and perfectly within the law. That’s a problem that needs more than an election to fix. If Biden does win, he should appoint Warren to a position where she can help craft a wealth tax.

Jeet HeerJeet Heer is a national affairs correspondent at The Nation and the author of In Love with Art: Francoise Mouly’s Adventures in Comics with Art Spiegelman (2013) and Sweet Lechery: Reviews, Essays and Profiles (2014).

Featured image:President Donald Trump delivers remarks in the Roosevelt Room. (Chip Somodevilla / Getty Images)

(The Nation)